Omnicom posts 28% profit surge for '02

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Omnicom Group laid out a bullish forecast for 2003 after reporting strong results for 2002.

The holding company, continuing to report standout results in a depressed category, posted net income of $201.5 million for the fourth quarter. That was up 23% from the year-ago period, and up 8.7% after factoring out accounting changes enacted in 2001. Net income for the year rose 28% to $643.5 million, or 10% after factoring out the accounting changes. Omnicom holdings include BBDO Worldwide, Fleishman-Hillard and Rapp Collins Worldwide.

Annual revenue was up 9.4% to $7.5 billion. Traditional advertising revenue grew 10.2% for the fourth quarter and 9% for the year. Customer relationship management revenue rose 8.7% in the quarter and 14.2% for the year; specialty communications rose 14.4% for the quarter and 17.6% for the year. Public relations, down 10.4% for the quarter and 6.2% for the year, remains a "weak spot," said Chief Financial Officer Randall Weisenburger.

buying continues

This was Omnicom's seventh consecutive quarter of net income growth. Mr. Weisenburger said it was the 46th consecutive quarter; however, his claim factors out a one-time gain related to the sale of a stake in interactive shop Razorfish during the first quarter of 2000, a gain that put first-quarter 2000 net income ahead of the same period in 2001.

Omnicom continued its acquiring ways, buying 11 companies last quarter. The company confirmed Ad Age's January report that it bought Organic, an interactive shop that had been owned by an Omnicom-backed private partnership, Seneca Investments (AA, Jan. 27). Omnicom is expected to buy a second Seneca shop, Agency.com.

Omnicom's U.S. revenue rose 8% for the quarter and 15% for the year while international revenue rose 6% for the quarter and 3% for the year. Among geographic regions, Germany and Brazil remain weak, said President-CEO John Wren. He said additional "cost actions" may be needed in Europe this quarter given continued weakness in some European markets. Meanwhile, broadcast media buying and CRM activities are performing well, especially in the U.S.

long-term bullish

The ad-market outlook is cautious in the short term due to the risk of war in Iraq, but bullish in the long term, said Mr. Wren. The strong broadcast TV ad market and sellouts of the Super Bowl and Academy Awards broadcasts are signs of strength, he said. He anticipated pent-up demand for advertising would be released once the Iraq situation is resolved.

"Companies have restructured to the point where there is no more to do and they have to address their market share," said Mr. Wren. "We'll start to see that after some of these clouds fade."

Omnicom's stock closed at $57.37 on Feb. 25, the day of its report, up 6.2%. That's up from a 52-week low of $40.74 last July but 47% below the all-time high of $107.50 in December 1999.

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